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30 Jan, 2008 02:49

Gazprom's Siberian takeover a win-win deal?

Gazprom is close to finalising its deal with oil firm TNK-BP, which will see it take control of the giant Kovykta gas field, in Siberia. This follows earlier threats that TNK-BPs licence may be revoked.

Gazprom is to take over TNK-BPs 63% stake in Rusia Petroleum, the company that holds the operating licence for the Kovykta gas field.

The parties agreed on an in-principle sale last autumn, but with estimates ranging from $US 600 million to $US 900 million for the stake they've been haggling ever since.

The Kovykta field is located in the Irkutsk region, and is estimated to contain almost two billion cubic metres of gas – almost twice those of Norway.

According to Russian law, TNK-BP can export their gas only through Gazprom's infrastructure.

However, the projects development demands significant investment. TNK BP has been developing the filed for more than 14 years and is has spent a further $US 200 million since the in principle agreement to sell to Gapzrom.

These sums have some asking if the project was too big and expensive.

“Some of the most difficult projects in the world – technically, remote, needing infrastructure – are in Russia. I believe over time there will be some tax incentives to accelerate them to prevent Russia's on shore oil production from sliding down,” expects TNK-BP President Robert Dudley.

Analysts say TNK-BP has made a good compromise, and add that it is likely to the British company will remain engaged with Kovykta.

“It's highly likely that there will be relations with TNK-BP and Gazprom on Kovykta field. TNK-BP has the rights to buy 25 per cent of the asset at a later date,” believes Tom Mundy, Equity Strategist at Renaissance Capital.

For Gazprom Kovykta will help improve its capacity to supply the domestic market and enlarge exports to gas-hungry Asian countries.